The Bangko Sentral ng Pilipinas (BSP) believes inflation will remain elevated after quickening to 5.4 percent in May, its highest level for more than three years, from 4.9 percent in April.
BSP Governor Benjamin Diokno said that the inflation outturn last month was within the central bank’s month-ahead forecast of five to 5.8 percent.
“The latest inflation outturn remains consistent with the BSP’s assessment that inflation will remain elevated in the near term as supply-side pressures persist. Given these conditions, the BSP continues to support sustained implementation of non-monetary interventions by the national government to mitigate the impact of supply constraints,” Diokno said.
Despite accelerating to its highest level since the 6.1 percent booked in November 2018, inflation averaged 4.1 percent from January to May this year and exceeded the government’s two to four percent target.
The incoming Finance Secretary said that the rise in headline inflation last month was due largely to faster increases in the prices of food and transport.
“The main contributors to the increase in food inflation are meat, fish, and vegetables albeit most food commodities also posted higher year-on-year inflation in May relative to the previous month,” Diokno said.
Likewise, he added that non-food inflation also went up due mainly to the increase in gasoline and diesel prices, which in turn, more than offset the reduction in electricity rates and prices of liquefied petroleum gas during the month.
Monetary authorities, Diokno said, would remains watchful over evolving price trends, particularly the prospects of further second-round effects and stands ready to undertake appropriate measures as needed to safeguard its price stability objective.
Diokno hinted of a follow up rate hike of 25 basis points this year after the central bank’s Monetary Board started its interest rate liftoff with a 25 basis points hike last May 19 to curb rising inflationary pressures.